There are two ways to become an EA. One is to have worked for the IRS for a minimum of five years. The other is to pass a three-part exam and to undergo a thorough background check. An EA needs no prior preparer experience in order to take the EA examinations, called the Special Enrollment Examination or SEE. They don’t need to even have filled out a return or ever have to once they become an EA. But they do have to have special competence in tax matters. The following areas encompass the three exams, which are solely on taxation.
Part 1 – Individual (100 questions exclusively on the tax code for individuals)
Part 2 – Business (100 questions exclusively on the tax code for business entities)
Part 3 – Representation, Practice and Procedures (100 questions primarily on Circular 230, the Treasury Department guide for practicing before the IRS.)
The bottom line is that EAs must know pretty much everything on income taxes for individuals, small businesses, partnerships, C corporations, and S corporations, They also need to know about inheritance taxes, gift taxes, estate taxes, payroll taxes, and retirement plans as well as non-profits.
For more information on Enrolled Agents, their background and requirements, please view the Enrolled Agent page on our web site. For information about how we can represent you with tax issues, please see our Representation page. When Enrolled Agents take their required continuing professional education (CPE), which consists of 72 hours every three years (more if they are NAEA members), it must be 100% in taxation and the ethics of taxation.
Summary
When you compare the two designations, CPA or EA, you come to realize that for EAs, tax issues are their only specialty. Their mandatory continuing education is solely on taxation, which means that their focus is on that one topic and very little else, except for mandatory ethics.
The bottom line is: a CPA does not have the tax expertise of an EA and an EA does not have the accounting expertise of a CPA. Part of the problem we face as a tax professional is the public’s understanding of what these two designations mean and what expertise each one may possess. Most professionals would not recommend an EA to a client that needed accounting expertise but we can’t figure out why so many professionals recommend a CPA for tax purposes. The reason may simply be that the average taxpayer does not know what an EA is or does. Simply stated, the definition of an EA is: “one who is RECOGNIZED by the IRS as a tax expert.” Enrolled Agents are the only FEDERALLY Authorized Tax Professionals.
Wouldn’t you rather go to someone who knows taxes for a tax issue and to an accountant for an accounting issue?
